The upcoming year will see a continuation of the trend towards small-cap IPOs and a move away from reverse takeovers, predicts The Public Listing Co.
In a note outlining key IPO trends for 2018, The Public Listing Co managing director James Mawhinney tipped the number of small-cap IPOs to rise as the number of reverse takeovers declines.
According to the note, 94 new IPOs had listed on the ASX over the last 12 months, a rise of 11 per cent from 2016; 83 per cent of these new listings had reached or exceeded their subscription targets.
“We have seen renewed enthusiasm for small-cap resources stocks on the ASX, and a corresponding increase in demand for IPOs in this sector,” Mr Mawhinney said.
At the start of 2017, the amount raised by small-cap IPOs went past $7.5 billion.
Mr Mawhinney attributed the rise in small-cap IPOs to a resources sector that had bounced back.
“Resources is well understood by Australian investors,” he said.
“And as the likes of mining technology improves, we are starting to see more efficient mining techniques, and in some instances old mines being reopened, which is contributing to this surge back towards the resources sector.”
Moreover, changes to the ASX listing requirements in late 2016 (which saw an increase to the 'assets test' thresholds from net tangible assets of $3 million to $4 million and an increased market capitalisation threshold of $10 million to $15 million) served to sway companies away from RTOs, Mr Mawhinney said.
Only 10 companies underwent a reverse takeover in the first six months of 2017 compared with 69 last year, according to the note.
“The tightening of the ASX listing rules has meant companies are re-considering IPO’s as a more efficient means of listing,” Mr Mawhinney said.
“In our experience, a RTO is a high-risk strategy to access capital from the public markets, and requires all the parties’ interests to be aligned from the outset in order to successfully take a company to market.”